Is Obamacare Headed Back To SCOTUS? - Health Care Edge

SUBSIDY SCRAMBLE:Within hours of each other, two federal appeals courts issued conflicting rulings yesterday in the lawsuits challenging Obamacare's insurance subsidies. A panel of the D.C. Circuit Court of Appeals said the subsidies are illegal in states with federally run exchanges, while the 4th Circuit said the tax credits are legal nationwide. The IRS will continue to make subsidies available while the cases work their way through the appeals process, so no one will lose their financial assistance right away -- and maybe never, if the Justice Department can win its next appeal and keep the issue out of the Supreme Court.

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COURTS: The Affordable Care Act specifically authorizes subsidies in "an exchange established by the state," and the plaintiffs in both cases said the administration violated the law by also extending subsidies to the 36 states using the federal system. Defenders of the health care law said that reading is too narrow, and that Congress clearly intended for the financial assistance to be provided equally on all exchanges. (Sophie Novack and Sam Baker, National Journal)

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GAO STING FINDS OBAMACARE ELIGIBILITY EASY TO FAKE: Eleven out of 12 fake applications for health insurance got through a verification process and received government subsidies for coverage in an undercover test operation launched by the Government Accountability Office, according to advance testimony from Seto Bagdoyan, acting director of GAO's Forensic Audits and Investigative Service. Bagdoyan will discuss the issue in a hearing of the House Ways and Means oversight subcommittee this morning. (Maggie Fox and Joel Seidman, NBC)

ADMINISTRATION WILL ADJUST CONTRACEPTION ACCOMMODATION FOR RELIGIOUS NON-PROFITS: In a brief filed Tuesday with the U.S. Court of Appeals for the 10th Circuit, Justice Department lawyers said that the federal government will issue new regulations in the next month to apply to nonprofit organizations that oppose to the current compromise, which involves filling out a form stating their objection to providing birth control coverage so that it may be provided by the insurance company instead. Details of the new rule have not yet been announced; the change follows a court injunction issued earlier this month to Wheaton College, and could be aimed at preempting possible Supreme Court consideration of the case. (Louise Radnofsky, Wall Street Journal)

More on the Obamacare Court Cases

WHAT HAPPENS NEXT: Halbig could be reargued in front of all 11 judges on the D.C. Circuit Court (the administration says it will request this); King could be reargued before the Fourth Circuit; pending decisions on similar lawsuits will be issued by other courts; the rulings could be appealed to the Supreme Court; Congress could act; states could act. (Margot Sanger-Katz, New York Times)

White House Press Secretary statement: "Another partisan attempt to harm the Affordable Care Act failed today. This latest attempt was undermined by a unanimous judicial panel in the 4th Circuit. The law was designed to make health care affordable through tax credits–and it is working."

THE ROAD TO SCOTUS: As the two sides map out their next steps, the big question is whether the subsidies issue will give the Supreme Court a third (!) crack at Obamacare. The challengers want a Supreme Court ruling and will likely appeal their loss, in the 4th Circuit, directly to the high court. The Justice Department, though, will appeal its loss to the full D.C. Circuit; a victory there would erase Tuesday's circuit split and make a Supreme Court hearing less likely. (Sam Baker, National Journal)

HALBIG THREAT MAY NOT BE THAT BIG:In 2012, Chief Justice John Roberts had the opportunity to gut Obamacare, but instead he left the law largely intact and kept the Supreme Court out of a bitter, protracted political fight. Why wouldn't he do the same thing this time? (Ezra Klein, Vox)

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OBAMA WILL PROBABLY WIN:The challenge to Obamacare's subsidies will probably go all the way to the Supreme Court, but the White House has a good chance there -- in part because the whole statute is inconsistent about state versus federal exchanges, and in part because there's not much evidence Congress intended anything but a 50-state system. (Tom Goldstein, Washington Post)

HERE'S WHAT OBAMACARE'S AUTHORS SAY THEY MEANT: An amicus brief filed by seven Democratic members of Congress involved in writing the law--including Sen. Max Baucus, House Minority Leader Nancy Pelosi, and Senate Majority Leader Harry Reid--as well as dozens of state legislators involved in interpreting and implementing the law, says that they did not intend subsidies to only be available through state exchanges. (Emily Badger, Washington Post)

HOW MANY STATES? The 4th Circuit and D.C. Circuit panels don't just disagree about whether subsidies are legal in federally run exchanges. They disagree about how many federal exchanges there are. The D.C. Circuit, in axing the subsidies, went with 36, while the 4th Circuit counted 34. The difference is in how they count "partnership" exchanges, like the ones in Idaho and New Mexico. It's not a big deal for now, but if the Halbig ruling were to hold, HHS and the IRS would need to know exactly where the line between state and federal control falls.

JUDGES LOVE FOOD METAPHORS:First it was the individual mandate and a hypothetical requirement to purchase broccoli. Now it's pizza. "If I ask for pizza from Pizza Hut for lunch but clarify that I would be fine with a pizza from Domino's, and I then specify that I want ham and pepperoni on my pizza from Pizza Hut, my friend who returns from Domino's with a ham and pepperoni pizza has still complied with a literal construction of my lunch order," 4th Circuit Judge Andre Davis wrote yesterday. (Josh Gerstein, Politico)

Veterans Affairs

SENATORS EXPECT QUICK ACTION FROM NEXT VA SECRETARY: Obama's nominee to lead the scandal-plagued Veterans Affairs Department, Robert McDonald, said in his confirmation hearing before the Senate Veterans Affairs Committee Tuesday that if confirmed, he would take action during his first 90 days in office. (Stacy Kaper and Jordain Carney, National Journal)

CONFIRMATION HEARING BECOMES DEBATE ON VA: Senate Democrats argued that Congress should give the agency the resources needed to fix its problems, while Republicans warned that more money would not solve the issue.

Lawmakers on both sides voiced strong support for McDonald, and committee chairman Bernie Sanders said he expects him to be confirmed. (Emmarie Huetteman, New York Times)

CDC

CDC REVIEWING LAB ACCESS TO DANGEROUS PATHOGENS: Centers for Disease Control and Prevention Director Thomas Frieden said Tuesday that the agency is looking into whether too many of its labs have access to hazardous pathogens, following revelations of safety breaches in some facilities. (Ferdous Al-Faruque, The Hill)

Drugs

WHERE ARE ALL THE NEW DRUG INNOVATIONS?: "More and more antibiotics are going out of circulation every year — either because bacteria have become resistant to them or because they have been replaced by better or less toxic drugs. The pharmaceutical arsenal against bacterial infections shrank to only 96 different molecules by the end of last year, 17 fewer than at the turn of the century.

Nevertheless, many of the big drug companies that produced the antibiotic breakthroughs of the past have decided to drop this line of research. And few new entrants are jumping in." (Eduardo Porter, New York Times)

GOOD NEWS FOR HIV PREVENTION: Use of the HIV drug Truvada lowered the rate of infection even among individuals who missed some doses of the daily prevention pill, according to a new study published in the British journal Lancet Infectious Diseases and discussed at the International AIDS Conference Tuesday. (Associated Press)

But the attorneys general already have the power under consumer protection laws to intervene against companies that make inappropriate health claims or sell items, like nicotine refill cartridges, that are not properly packaged to prevent them from being accidentally opened by a child and consumed, [chief deputy attorney general of Kentucky, Sean Riley] said." (Eric Lipton, New York Times)

Democratic Reps. Hank Johnson and G.K. Butterfield will hold a news conference with members of health care advocacy groups to announce the newly created State Medicaid Expansion Caucus at 10 a.m. Both lawmakers represent states -- Georgia and North Carolina, respectively -- that are not currently participating in Medicaid expansion under the ACA.

House Ways and Means Committee hearing on preventing abuse and fraud in the Affordable Care Act's premium subsidies at 10:30 a.m.

Senate Veterans Affairs Committee will vote on Robert McDonald's nomination to be next VA Secretary, said committee chairman Bernie Sanders, with a vote by the full Senate likely before the August recess.